The recently announced mega power project policy gives this benefit only to projects under the public sector.

In addition to this, the domestic equipment manufacturers have also asked the government to work out a parity between the taxes and duties applicable to domestic and foreign equipment manufacturers.

In a meeting with the top brass in the ministry of power on Thursday, the domestic equipment manufacturers conveyed that the tax concessions being extended to the foreign suppliers will also debar the Indian equipment suppliers from participating in any of the World Bank-funded projects, thereby putting them at a great disadvantage with their foreign counterparts.

Giving details, sources said that the World Bank is funding only those projects which either have a price preferencebenefit or attract customs duty, whichever is lower.

In the backdrop of zero import duty benefit, the domestic industry will always lose out to the overseas equipment suppliers in all the World Bank-funded projects.

Senior bureaucrats, including the secretary, department of heavy industries, P Shankar, secretary, department of public enterprises, S Narayan and chairman and managing director, Bhel, KJ Ramachandran and CMD, National Thermal Power Corporation, Rajendra Singh, met the secretary, power, VK Pandit on Thursday, and discussed the impact of tax concessions on the domestic manufacturers.

Sources said that Bhel and the private sector made a host of significant recommendations on protecting the interests of the domestic suppliers. The private sector domestic players were represented by the Confederation of India Industry (CII).

The domestic manufacturers also pointed out that the deemed export benefits given to them for all projects do not compensate for the tax concessions given to their foreigncounterparts.

It was pointed out that although under the deemed export benefits the terminal excise duty paid by them is refunded at a later stage, blocking of these funds with the government results in a higher cost of capital.

To avoid this unnecessary blocking of funds, which are refunded later, it was suggested that the government must give an upfront clearance without charging this terminal duty. This clause must form an integral part of the agreement between the government and the suppliers.

During the meeting, it was further pointed out, that the mega policy notification says that the state will be requested to exempt supplies made to the mega power plants from sales tax and local levies.

"This is not sufficient as the states will follow this only when they receive a directive from the centre. The government must follow this up with the state and issue a directive in this regard," sources said.

It was also suggested that the government must work out a formula for extending tax concessions tothe domestic manufacturers as well, enabling them to compete with their foreign counterparts.

"Otherwise, the tax concessions being given to the foreign suppliers will debar the domestic equipment manufacturers to participate in any private sector power projects," sources said.